PERFORMANCE MANAGEMENT IN HEALTH CARE:
THE PAST, THE PRESENT, AND THE FUTURE
Tobias Mettler, Peter Rohner1
Abstract
In today’s fast changing health care sector, decision makers are facing a growing demand for both
clinical and administrative information in order to comply with legal and customer-specific
requirements. Performance Management (PM) is thus becoming increasingly important to catch up
with the rising informational demands. However, little is known about the PM usage in health care
since the constituent research about PM is primarily focussed on the industrial sector. For this
purpose, an exploratory survey for the health care sector is presented.
1. Introduction
The adoption of information and communication technology (ICT) in health care is currently seen
as an opportunity to improve not only effectiveness, efficiency, and quality of health services but
also the transparency of the economic activities and the availability of information in real time [21].
Nevertheless the health care sector shows a relatively underdeveloped information system structure
[15, 16]. Conversely, studies on Health Information Technology discovered a significant
relationship between the financial well-being, size, and productivity of a health care organization
and its level of ICT adoption [3]. For example Parente and Dunbar found that especially health care
organizations with integrated information systems (IS) have higher total margins and operating
margins than those hospitals that do not have them [17]. However, the causality between ICT
investment and economic profitability could not be rigorously demonstrated yet. The question
whether health care organizations with greater profits from operations and total assets can afford
more sophisticated ICT investments or whether ICT itself has a positive effect on the hospital’s
performance is still unanswered.
Albeit the uncertainty about the business value of ICT investments, the health care organizations
will be in need of acquiring expertise and technology for Performance Management (PM) in order
to comply with new legal requirements of gathering systematic performance information (e.g. in the
course of DRG introduction in Switzerland the hospital’s are facing an advanced duty to supply
information to national and local authorities). Also the increasing competition in the sector will
foster the dissemination of a wide array of information including for example the provider’s
experience in treating particular diseases, availability of beds, pricing of health services etc. [18].
1
Institut für Wirtschaftsinformatik, Universität St. Gallen, Müller-Friedberg-Strasse 8, 9000 St. Gallen.
699
As PM is becoming increasingly relevant for the health care sector, we wanted to know what the
current state of PM adoption is and how health care organizations will develop their PM in future.
For this purpose we first discuss, based on the constituent literature, different definitions and
approaches of PM in the subsequent section. In a next step, the motivation and corpus of our
exploratory survey are described in the third section. The fourth section is dedicated to a discussion
of the results obtained from the survey. Finally, the main findings are summarised and subsequent
research activities outlined in the outlook.
2. Understanding Performance Management in the Context of Health Care
2.1. Defining Performance
Public sector organizations are differentiated in comparison with their commercial counterparts in
the private sector. “There is no profit maximising focus, little potential for income generation and,
generally speaking, no bottom line against which performance can ultimately be measured” [4].
Measure performance is therefore considered to be a somehow daunting endeavour. However, from
a management perspective performance is defined as valued contribution to reach the goals of an
organization [10]. Contributions to performance can be made by individuals or groups of
employees as well as by external groups. Using this perspective, performance management can be
seen as sequence of activities for
•
•
•
•
planning the value creation,
taking action to control value creation,
measurement of value contribution, and finally
rewarding the value contribution [20].
But what is performance in the context of health care? As the goals of health care organizations
often are not clearly defined (cf. section 4.1) and the value of health care service delivery is
difficult to allocate, public sector PM literature tends to use the three E’s − economy, efficiency, and
effectiveness − to define performance for the non-for-profit context [6, 7, 19]. Performance
therefore has to be perceived as a multidimensional phenomenon where the financial, respectively
value perspective (economy) is only one dimension of the whole. It is also necessary to consider
patient-related aspects (effectiveness) and procedural and knowledge-related aspects (efficiency).
According to this, potential areas where performance in health care can be measured are [3]:
• Health care financial strength (economy): Revenue optimization, productivity
improvement, streamlining claims processing, waste and cost control, activity-based
costing.
• Health care operations (economy): Partner management and measurement, collaboration
opportunities, agility improvement, working capital and asset management.
• Health care people development (efficiency): Provider experience measurement, provider
loyalty and the voice of the provider analysis, learning and growth measures, innovation,
knowledge, culture and intangible value analytics.
• Patient service and satisfaction (effectiveness): Including patient experience, engagement,
delight, loyalty and relationship measurement, as well as the most important of all –
measuring and tracking the voice of the patient.
700
• Health care marketing (effectiveness): Measuring and developing the growing importance
of healthcare branding, reputation and trust management, patient/customer segmentation,
patient profitability and patient lifetime value.
2.2. Defining Performance Management
Performance management in health care is not only aiming at the systematic generation and control
of an organization’s economic value but also at the optimization of the efficiency and effectiveness
of service delivery. Therefore PM, like other management approaches, only can be implemented
successfully, if strategic planning is closely linked to operational execution and controlling [13] (cf.
figure 1).
Strategize
Strategic
level
Take
corrective
action
Plan
Operational
level
Monitor and
analyze
Figure 1: Performance Management life cycle
While on the strategic level key performance indicators (KPI) for shaping the economy, efficiency,
and effectiveness of service delivery have to be defined (strategize) and process redesign and
process operationalization has to be initiated (plan), the operational level concentrates on the
measurement and reporting of performance (monitor and analyze) and on optimizing and adjusting
processes (take corrective action) [8, 13]. By the linkage between strategic and operational level,
PM provides feedback based on specifics rather than generalisations [1]. Thereby clinical as well as
administrative decision makers are given the ability to know at any point whether the strategy they
have formulated is, in fact, working, and if not, why.
3. Method and Data
In 2007, Gartner presented for the second time the Hype Cycle for Business Intelligence and
Performance Management [2] which is the result of a CIO survey of 2,000 globally operating
enterprises. It describes how organizations should prioritize investments in relation to the level of
technology impact. In order to ‘visualize’ technologies which are worth considering for adoption,
actual and potential solutions within the area of performance management and business intelligence
are placed on a hype cycle.
Motivated by this work, but doubting the representativeness of the hype cycle for the health care
sector (health care shows a relatively underdeveloped information system structure compared with
other industries [9, 15, 16]), we wanted to explore what the real state of adoption of PM is and in
what direction health care organizations will develop their PM.
To try to gain the necessary information on the PM adoption in health care, expert knowledge was
required. Therefore, the focus of the study was on the key actors or influential persons who take
701
part in the PM activities of health care organizations. For this purpose, a total of 20 health care
professionals in Switzerland were asked by means of a standardized questionnaire. As we focussed
on the quality of answers than rather on quantity, the convenience sampling method was used for
the selection of the respondents. From this basic population, 16 were completed by hospital CEOs,
hospital CIOs, or governmental health care deputies, and 4 by managers of IT enterprises working
for the health care sector. 12 of the respondents described themselves as working in a management
position. The remaining respondents were medical or business specialists (5 replies), or people
working at the interface between medicine and IT (3 replies). In order to ensure comprehensibility,
the respondents were supported by a research assistant in case of an unclear question item.
However, external influence over one particular respondent was reduced by answering them
simultaneously and conjointly.
The questionnaire was designed as follows (cf. figure 2):
• PM activities (Arabic numeral): Based upon the PM life cycle (cf. section 2.2) four batteries
of questions, respectively eight essential question items for PM adoption were identified.
Special emphasis was placed on the dimensions of KPI definition and on the support of
process performance analysis.
• Time dimensions (capital letters): Every question item was posed for the past, the present
and the possible future PM usage. Where the past or present status was not possible to
assess (binary, yes/no questions), the respondents had the option to choose the ‘unknown’
item. For the future development of PM the respondents had to opt for three likelihood
dimensions (unlikely, likely, definitively) to estimate its adoption.
• Influencing factors of PM adoption (Roman numeral): In a final battery of questions, the
respondents were asked about the influence of exogenous and endogenous variables on the
PM adoption.
2.1 Financials
2.2 Customers
2.3 Processes
1. Business goal
definition
Exogenous influencing factors
I. Regulatory setting
Strategize
2. Key performance
indicator definition
II. Technological advancement
2.4 Knowledge
3. Process performance
design
A. Past
Plan
4. Process performance
operationalization
6.1 BI platform
6.2 Dashboards /
Scorecards
6.3 Spreadsheet
solutions
5. Process performance
measurement
6. Process performance
analysis
State of PM
adoption
8. Plan and process
adjustment
B. Present
C. Future
Monitor and
analyze
Endogenous influencing factors
III. Strategic positioning
7. Performance
reporting
Time
IV. Employee behaviour
Take
corrective
action
V. Organizational structure
Figure 2: Conceptual representation of the exploratory survey
702
4. Results
The analysis of the results was performed in accordance with the two dimensions of the PM life
cycle – strategic level (cf. section 4.1), and operational level (cf. section 4.2). In addition, a brief
discussion about the influencing factors of PM adoption is given in section 4.3.
4.1. Strategic level
Figure 3 provides a summary of the evolution of strategic PM activities. Looking at this figure it is
possible to determine that the emphasis of strategic PM is today taking place in the strategize task,
with 75 percent of all health care organizations defining business goals (only 37.5 percent in the
past), and nearly all defining KPIs (only 50 percent in the past). This result is also reproduced by
other studies in the field [11]. However, the constitution of the KPIs in the respective health care
organizations is different. Only 12.5 percent use customer-related, and 18.8 percent use processrelated performance indicators. Interestingly, although it is more difficult to define, 43.8 percent of
the health care organizations currently include knowledge-related performance indicators, whereas
financial indicators are only used by 31.3 percent.
In contrast, the performance planning task is still underdeveloped, with 25 percent doing process
performance design (12.5 percent in the past), and 43.8 percent doing process performance
operationalization (6.3 percent in the past).
Figure 3: Past and present adoption rate of strategic PM activities
The analysis of the past and present PM usage raises the question for its evolution in the future.
This is illustrated in figure 4. All of the asked health care professionals appraised that their
organization will likely or definitively initiate business goals in the near future. 75 percent of them
valued that KPIs definitively, and 25 percent that they likely will be introduced. Opinions differ in
the future adoption of performance planning activities. Process performance design will definitively
be introduced by 18.8 percent, whereas 56.3 percent said that it is likely and 25 percent that it is
unlikely to happen in the next years. Practically the same situation can be found in the process
performance operationalization, with 31.3 percent of definitive, 50 percent probable, and 18.8
percent improbable adoption.
703
Figure 4: Manifested future adoption behaviour of strategic PM activities
4.2. Operational level
To successfully implement PM it is necessary to link strategic planning with operational execution.
However, as discussed in the prior section, only a small part of the health care organizations really
accomplish the full range of strategic PM activities. Therefore, the operational excellence of PM is
highly important as it often builds the basis for improving the strategic level (in many other
industries the concept of PM emerged bottom up, i.e. starting with performance measurement as
means of monitoring and maintaining organizational control and not till then to ensure the
fulfilment of the organizational strategy [1, 14]). Thus, operational PM is not an end in itself but an
instrument for more effective strategy realization.
In contrast to the strategic level where the survey data showed a clear difference of the maturity of
the single tasks (i.e. strategizing performance is more common than planning performance), no
such conclusion can be made for the operational level when comparing the monitor and analyze
task with the take corrective action task. Therefore, the survey data is analyzed on activity level.
Figure 4 provides a summary of the evolution of operational PM activities.
Looking at this figure it can be determined that a little bit more than the half, notably 56.3 percent,
currently measures the performance of their processes (only 25 percent in the past). Thereof 43.8
percent use automatic measurement mechanisms (e.g. data generated from work flow management
systems or other information systems). Interestingly, all the organizations that perform a form of
process performance measurement confirmed to also analyze the collected information. For doing
so, 75 percent of the surveyed organizations use simple spreadsheet solutions. Other 50 percent of
the cases additionally apply a business intelligence platform, or in 12.5 percent of the cases
dashboards and scorecards solutions.
Surprisingly, more of the surveyed health care organizations perform some kind of performance
reporting (62.5 percent) than performance measurement is conducted (56.3 percent). This raises
some further questions, e.g. how health care organizations generate their reports, what exactly is
reported, and what quality do these reports have. Anyway, it was not the focus of the survey to
answer these questions but this certainly can be used as a good starting point for future research.
704
Another interesting question is: What is done with the results of performance analysis and
reporting? Today, only 31.3 percent of the surveyed health care organizations (12.5 percent in the
past) actively integrate some kind of plan and process adjustment activity in their operational PM.
In our opinion this is a key activity that needs to be better reflected by the health care organizations
since it is needed to close the feedback loop between the operational and the strategic level of PM.
Figure 5: Past and present adoption rate of operational PM activities
Figure 6 illustrates the manifested future adoption behaviour of operational PM activities.
Interestingly, the majority of the respondent recognizes that they definitively have to improve
measurement, analysis, and reporting. In doing so, 81.3 percent want to implement a BI platform,
another 31.3 percent dashboards and scorecard solutions in the future. However, the adoption of the
plan and process adjustment activity is definitively intended by only 43.8 percent, and probably by
other 43.8 percent of the surveyed health care organizations.
Figure 6: Manifested future adoption behaviour of operational PM activities
705
4.3. Influencing factors of PM adoption
It is a fact, that the adoption behaviour of an organization (cf. figure 4 and 6) is influenced by a
number of exogenous and endogenous factors. For example Burke et al. [5] point out, that
especially the organizational structure (e.g. size, location) and strategic positioning (e.g. economic
orientation, degree of cooperation) have a significant impact on the success of IT adoption of
hospitals. Others emphasise the importance of the employee behaviour (e.g. flexibility,
professionalism) [12] or the influence of external factors like regulatory conditions (e.g. laws,
policy) [9] or the technological advancement itself.
Looking at figure 7 it is possible to determine that especially the regulatory setting (with 80 percent
of the respondent rating it highly influential) and the strategic positioning (with 60 percent rating it
highly influential) are going to have a strong impact on the PM adoption in future. A possible
explication for this is that the Swiss health care sector is currently facing a period of extreme
change (e.g. introduction of DRG, accumulation of purchase and sale of hospitals). However,
persistently but not less important is the behaviour of employees (with 46.7 percent rating it highly
influential) as it is often a question of culture to permit the planning, measurement and
communication of performance. The technological advancement and the organizational structure
seem to be less influential.
Figure 7: Present and future influencing factors of PM adoption
706
5. Conclusion and Outlook
In other industries PM is generally regarded as an important driver, or at least as a trigger, for
understanding organizational performance in order to better fulfil the strategic targets [14]. Thus,
technology to support PM activities like business intelligence platforms, dashboard solutions, datamining tools etc. are seen as commodity with less than 2-5 years to mainstream adoption [2]. As
health care significantly differs from other sectors, the aim of this contribution was to analyze the
current state of PM adoption and how health care organizations will develop their PM in future.
On the other hand, future and present adoption of PM is influenced by a wide range of factors such
as the regulatory setting where the health care organizations is embedded, the complexity and
compatibility of new technologies, the strategic targets of the organization, the attitude of the
employees, and the organizational structure. It was found that especially the changing regulation
and the increased market dynamics are major drivers for the PM adoption. However, the needs of
the employees and the organizational structure still are important parameters to consider.
From a strategic PM perspective, it can be said that health care organizations realize that is
important to define business goals and KPIs in terms of economy, efficiency and effectiveness of
health service delivery. However, the design of appropriate processes (e.g. how is data collected,
analyzed and communicated?) and the planning of the operationalization (e.g. which tools support
the data collection?) is practically omitted. This raises the question about the quality of the PM
currently available in the surveyed health care organizations. But as this was not the focus of this
survey, it will be a good starting point for another study.
From an operational PM perspective, health care organizations seem to be more familiar with these
kinds of activities. Performance measurement, analysis and reporting are conducted by more than
the half of the surveyed organizations. The use of sophisticated tools for measurement (e.g. work
flow management systems) and analysis (e.g. business intelligence, dashboards) is rather
uncommon yet. Again, this raises the question about the quality of data generated by such a PM
system but also about the efficiency (e.g. how much time is used to manually collect and analyze
data?). Another interesting result from the survey is that only a third of the respondent affirmed to
actively use the output of the performance monitoring and analysis phase to enhance strategy
formulation and planning. Thus, the effectiveness of the PM in use can be doubted as well, since the
crucial link between organizational level and strategic level does not exist.
Building on the results presented in this paper, future work should be directed at prioritising areas
for action in the sense of a roadmap for optimizing PM quality, efficiency, and effectiveness of the
health care organizations. This will certainly help the health care sector to catch up with other
industries.
6. References
[1] AMARATUNGA, D., BALDRY, D., Moving from Performance Measurement to Performance Management, in:
Facilities, Vol. 20, 2002, pp. 217-223.
[2] BITTERER, A., SCHLEGEL, K., HOSTMANN, B., et al., Hype Cycle for Business Intelligence and Performance
Management, Gartner, Stamford 2007.
[3] METTLER, T., VIMARLUND, V., Understanding Business Intelligence in the Context of Health Care, in: Bath, P,
Day, K, Norris, T. (Eds.): 13th International Symposium for Health Information Management Research - ISHIMR
2008. Massey University, Auckland 2008, pp. 61-69.
707
[4] BOLAND, T., FOWLER, A., A Systems Perspective of Performance Management in Public Sector Organisations,
in: The International Journal of Public Sector Management, Vol. 13, 2000, pp. 417-446.
[5] BURKE, D.E., WANG, B.B.L., WAN, T.T.H., et al., Exploring Hospitals’ Adoption of Information Technology, in:
Journal of Medical Systems, Vol. 26, 2002, pp. 349-355.
[6] CARTER, N., KLEIN, R., DAY, P., How Organisations Measure Success: The Use of Performance Indicators in
Government. Routledge, London 1995.
[7] FLYNN, N., Public Sector Management. Prentice-Hall, London 1997.
[8] FROLICK, M.N., ARIYACHANDRA, T.R., Business Performance Managenent: One Truth, in: Information
Systems Management, Vol. 2006, pp. 41-48.
[9] HERZLINGER, R.E., Why Innovation in Health Care is so Hard, in: Harvard Business Review, Vol. 84, 2006, pp.
58-66.
[10] HOFFMANN, O., Performance Management – Systeme und Implementierungsansätze. Haupt, Bern 2002.
[11] JACKSON, A., LAPSLEY, I., The Diffusion of Accounting Practices in the New "Managerial" Public Sector, in:
The International Journal of Public Sector Management, Vol. 16, 2003, pp. 359-372.
[12] LAPOINTE, L., LAMOTHE, L., FORTIN, J.-P., The Dynamics of IT Adoption in a Major Change Process in
Healthcare Delivery: 35th Hawaii International Conference on System Sciences. IEEE Computer Society, Washington
2002, pp. 148.142.
[13] MELCHERT, F., WINTER, R., KLESSE, M., Aligning Process Automation and Business Intelligence to Support
Corporate Performance Management, in: Romano, N.C., Jr. (Ed.): 10th Americas Conference on Information Systems
2004. Association for Information Systems, New York 2004, pp. 4053-4063.
[14] NANNI, A.J., DIXON, J.R., VOLLMANN, T.E., Strategic Control and Performance Measurement, in: Journal of
Cost Management for the Manufacturing Industry, Vol. 4, 1990, pp. 33-42.
[15] O'RIAIN, C., HELFERT, M., Analysing Healthcare Information System Strategies in Europe: UKAIS 2005 - 10th
Annual Conference. UK Academy for Information Systems, Newcastle 2005.
[16] PARENTE, S.T., Beyond the Hype: A Taxonomy of e-Health Business Models, in: Health Affairs, Vol. 19, 2000,
pp. 89-102.
[17] PARENTE, S.T., DUNBAR, J.L., Is Health Information Technology Investment Related to the Financial
Performance of US Hospitals? An Exploratory Analysis, in: International Journal of Healthcare Technology and
Management, Vol. 3, 2001, pp. 48-58.
[18] PORTER, M.E., OLMSTED TEISBERG, E., Redefining Competition in Health Care, in: Harvard Business
Review, Vol. 82, 2004, pp. 64-76.
[19] ROUSE, J., Performance Management, Quality management, and Contracts, in: Horton, S., Farnham, D. (Eds.):
Public Management in Britain. Macmillan, Basingstoke 1999, pp. 76-93.
[20] SPANGENBERG, H., Understanding and Implementing Performance Management. Plumstead, Juta 1994.
[21] WORLD HEALTH ORGANIZATION, eHealth Tools & Services: Report of the WHO Global Observatory for
eHealth, http://www.who.int/kms/initiatives/tools_and_services_final.pdf
708